Tax bill in NJ: Paying more or less might depend on if you have kids

After some opening remarks at a "bill passage event" at the White House, Trump turned the microphone over to lawmakers to comment on the bill. (Dec. 20)
AP

WASHINGTON, DC - DECEMBER 20: U.S. President Donald Trump, flanked by Republican lawmakers, celebrates Congress passing the Tax Cuts and Jobs Act with Republican members of the House and Senate on the South Lawn of the White House on December 20, 2017 in Washington, DC. The tax bill is the first major legislative victory for the GOP-controlled Congress and Trump since he took office almost one year ago. (Photo by Chip Somodevilla/Getty Images)(Photo: Chip Somodevilla, Getty Images)

Despite limits on prized deductions in the new tax bill, New Jerseyans still could come out ahead – as long as they have children.

Under the bill, the difference could be vast. A married household with two children and income of $80,000 could see their tax bill cut by 30 percent. A married household with no children and the same income could see their bill rise 19 percent.

"That’s the way it’s looking so far," said Lauren Mazzella Landolfi, a certified public accountant with Wilkin & Guttenplan based in East Brunswick.

Congress on Wednesday approved a sweeping tax overhaul in hopes of jump-starting the economy, giving President Donald Trump a major legislative win. See the GOP celebrate their victory in the video above.

It capped a fierce debate that had 14 of 15 New Jersey lawmakers from both sides of the aisle voting no, chiefly because the bill limits state and local tax deductions that provided relief to households in high-tax states. Only U.S. Rep. Tom MacArthur, a Republican whose district represents parts of Ocean and Burlington counties, voted for the bill.

The bill is expected to cost $1.5 trillion over 10 years and includes steep tax cuts to corporations and small businesses. Opponents have said the benefits are skewed to the nation's wealthiest households.

The new bill is expected to go into effect Jan. 1. Taxpayers this spring will file their taxes under the previous rules. But workers could see less money withheld in their paychecks for federal taxes sometime in February, said I. David Eliran, a Freehold Township-based accountant.

Landolfi and her colleague Gail Rosen analyzed the tax bill's impact on New Jerseyans for the Asbury Park Press, and they came to at least one surprising conclusion: The state and local tax deductions, which include property taxes and will be capped at $10,000, isn't enough to push most New Jerseyans into a higher tax bill.

That's because of many high-income households paid what's called the Alternative Minimum Tax and were not receiving the benefit of these deductions in the first place.

Lawmakers listen to US President Donald Trump speak about the passage of tax reform legislation on the South Lawn of the White House in Washington, DC, December 20, 2017.
Trump hailed a "historic" victory Wednesday as the US Congress passed a massive Republican tax cut plan, handing the president his first major legislative achievement since taking office nearly a year ago. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images(Photo: BRENDAN SMIALOWSKI, AFP/Getty Images)

Congress, with a push from U.S. Sen. Marco Rubio, R-Fla., agreed to expand the child tax credit. The current law offers credits of $1,000 per child to households with income of up to $110,000, before phasing out. The new bill doubles the tax credit to households with income of up to $400,000, before phasing out.

The result shows many married couples with children fare better than childless counterparts, particularly in the middle class.

In one example, a married couple with two children and household income of $175,000 a year get a 5 percent tax break. Taxpayers with the same circumstance and no children pay 4 percent more.

"In many scenarios there seems to be an overall reduction in taxes," Landolfi said. "Families with children seem to fare better because there’s an expansion of the child tax credit."

Landolfi and Rosen took into account income, state income taxes, real estate taxes, mortgage interest and charitable deductions on hypothetical households in four income brackets.

It wasn't comprehensive; renters and 1 percenters were left out of the analysis. But it should give taxpayers at the Jersey Shore a general sense of where they will fall come tax return time in 2019.

"It’s a one-size-fits-one solution," Landolfi said. "Your personal tax circumstances are very different than the person next to you.”

epa06400499 US President Donald J. Trump, joined by Republican members of the House and Senate, speaks about the passage of the Republican tax plan on the South Lawn of the White House in Washington, DC, USA 20 December 2017. The President is expected to sign the bill in January. EPA-EFE/JIM LO SCALZO(Photo: JIM LO SCALZO, EPA-EFE)